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March 3, 2015

Marketing Strategies for Challenger Firms

Firms take the role of challengers when they make aggressive efforts to further their market share.
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Introduction

Firms that are not market leaders in their industry or product category are trailing firms. One or two of them could be close competitors to the market leader and they can be termed as runner-up firms. These firms can take the role of challengers when they make aggressive efforts to further their market share or they can be termed followers when they keep quiet and maintain their market share.

There are successful trailing firms which challenged and became industry No. 1 firms. Canon is one such example in copiers. Toyota is now the world No. 1 company in automobiles; it displaced General Motors.

The challenger companies have to attack the leader, other comparable firms, and smaller firms in their bid to gain market share.

Attack has a greater probability of success when there is customer dissatisfaction with the current leader. There is a gap in the market which the leader is not serving. Comparable firms can be successfully attacked when they are underfinanced and are charging excessive prices and customers are showing dissatisfaction. Similarly, underfinanced smaller firms can be attacked to gain market share.

With each attack, the challenger may hope to gain a reasonable increase in its market share.

The following attack strategies are possible.

Frontal Attack

An attack is called a frontal attack when the opponent’s strength is challenged head on. In marketing, the fight is done all fronts in market segments and areas where the opponent is currently strong. The general idea is that to win in a frontal attack, the challenger requires three times the fire power of the opposite side. What is fire power in marketing? Price of the product, quality of the product, sales effort, advertising effort, and service effort etc. are the various types of fire power in marketing. The challenger must be able to deploy superior fire power in the markets he is challenging.

Modified Frontal Attack

Price is the challenging dimension.

A modified frontal attack uses price as the challenging dimension. The challenger matches the opponent in other dimensions but will charge a lower price over an extended period.

Flank Attack

Attacking a weak position in the opponent’s force is flank attack. Challenger identifies the weak areas in the offering as well as marketing territories of the opponent and attacks those areas. A front attack may also be launched simultaneously, but the frontal attack is only to engage the opponent. But the real victory is won in the flanks. Market share gain in weak territories is the objective, but the opponent is forced to defend his share even in his strong territories and products.

Encirclement Attack

In this attack both strong areas and weak areas attacked simultaneously. This type of attack is more often done by a leader when challenged. When the leader makes an aggressive attack to gain market share from the trailing firms, he can use this strategy. Even other firms, can use this strategy when they are attacking a much smaller firm’s market share.

Guerilla Attack

Guerilla attacks consist of waging small, intermittent attacks on different marketing territories of the opposing firm for smaller periods of time. The aim is to harass and demoralize the opponent initially before launching the main attack.

Bypass Attack

In a bypass attack to gain market share, a firm identifies segments not served by the existing firms and makes efforts to gain market share.

The Marketing Firepower

Price discounts: The challenger can sell a comparable product at a lower price.

Cheaper goods: The challenger can come out with economy goods with lesser number of features. The strategy will succeed when there is significant number of buyers in need of lower priced product.

Prestige goods: A challenger can launch a higher quality product with more features.

Product proliferation: The challenger can offer a greater product variety.

Product innovation: the challenger can come out with an improve product.

Service innovation: Improvement in service offered to the buyers.

Distribution innovation: a new distribution outlet that offers additional convenience to buyers.

Process innovations: The challenger may have done a process innovation that gives better quality or lower cost and it is passed on to buyers.

Advertising innovation: The challenger may have innovative communications strategy that reaches and motivates larger number of potential customers resulting in higher sales.

Challenger needs to have a product-service offer or marketing mix advantage that is of value in the market place. Then he can use that advantage to gain market share by employing a suitable attack strategy.